TMI Blog2009 (7) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... fees for included services and hence covered under art. 12 of DTAA and fees for such services was to be taxed @ 15 per cent as per the treaty. Accordingly, the resultant addition was made. CIT(A) deleted the addition on the ground that the assessee did not make available technology, skill or experience, etc. to TVCL. HELD THAT:- In the instant case it is noticed that the assessee specifically stated before the AO about the rendering of such services from overseas. Not only that, the detail of such services along with consideration which is part of VSAT agreement was also made available. In such a situation it is too late in the day for the learned Departmental Representative to contend that the matter be restored to the file of AO for a fresh determination of the nature of services and the resultant taxability. We, therefore, hold since the assessee did not make available any technical knowledge, experience or skill to TVCL by way of rendering PMES FT services overseas. Article 12 of DTAA does not apply in the instant case and the consideration cannot be included in fees for included services. Having held that the assessee did not receive fees for included services within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quire a totally fresh investigation of altogether new facts. Even the DR has not placed on record any material to show the activities carried on by the PE for enabling us to make any comparison of those activities with the present disputed activities. Under such circumstances we are of the considered opinion that the additional ground does not pass the test laid down by the Hon'ble Supreme Court Jute Corporation of India Ltd. vs. CIT [ 1990 (9) TMI 6 - SUPREME COURT] for its admission. We, therefore, refuse to admit this additional ground. Non-chargeability of interest u/s. 234B - AO charged interest under this section - CIT(A) held that the assessee could not be subjected to interest as it was not liable to pay advance tax - HELD THAT:- The assessee in the instant case is a non-resident and hence any person responsible for paying to it is under obligation for deducting tax at source if income is chargeable to tax under the Act. Sec. 208 provides that the advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year is five thousand Rupees or more. By virtue of s. 195 all the payments made to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------------------------------- 2. Installation, testing and commissioning 2,58,053 -------------------------------------------------------------- 3. Supervisory services 17,714 -------------------------------------------------------------- 4. Design review 10,000 -------------------------------------------------------------- 5. Factory acceptance test 15,000 -------------------------------------------------------------- 6. Project management and engineering support 2,51,083 -------------------------------------------------------------- 7. Overseas training 1,17,813 -------------------------------------------------------------- 8. Documentation 3,143 -------------------------------------------------------------- 9. On the job training 46,368 -------------------------------------------------------------- 10. Freight and insurance 7,857 -------------------------------------------------------------- 11. Sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He further did not find any merit in the contention raised on behalf of the assessee that although such services were technical in nature but did not quality as fees for included services since they did not 'make available' any technical knowledge, experience, etc. to TVCL. In his opinion when a series of technical works/services etc. were performed to achieve a desired result, the nature of such works/services has to be analyzed in connection with the end results and hence these works/services were diverted from the end product. In the alternative he held that PMES FT consisted of the development and transfer of a technical plan or technical design. In the final analysis he held that these services were in the nature of fees for included services and hence covered under art. 12 of DTAA and fees for such services was to be taxed @ 15 per cent as per the treaty. Accordingly, the resultant addition was made. The learned CIT(A) deleted the addition on the ground that the assessee did not make available technology, skill or experience, etc. to TVCL. He further held that such services were inextricably and essentially linked to the supply of equipment and hence should take the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as he dealt with cl. (a) of art. 7(1) without considering cl. (c) which was relevant for the purpose. It was, therefore, stated that the learned CIT(A) erred in deciding the issue in favour of the assessee without properly examining the detail and nature of services provided to TVCL. She requested the Bench for remitting the matter back to the file of AO for a fresh investigation as per law. 6. In the oppugnation, the learned counsel for the assessee strongly relied on the impugned order. His arguments were the reiteration of the reasoning recorded by the learned first appellate authority in deciding the issue in assessee's favour. It was specifically submitted that the assessee had provided complete details to the AO about the nature of services provided by it and hence no case should be made out that the nature of services were not examined. He took us through the relevant portion of VSAT agreement, copy of which has been placed at p. 127 onwards of the paper book. It was stated that PMES FT services were rendered outside India. He made distinction between the services rendered in and outside India by inviting our attention towards items at serial Nos. 2 and 3 of the above r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determination of taxability or otherwise in respect of Indian Rupees equivalent to 15,000 and 2,51,083 US $ towards PMES FT services. The case of the AO is that such services are in the nature of fees for included services as per art. 12. 8. Before we proceed further it will be apt to consider the prescription of the relevant part of art. 12, which is as under: "Article 12 Royalties and fees for included services. (1) Royalties and fees for included services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. (2) ............ (3) The term 'royalties' as used in this article means- (a) payments of any kind received as consideration for the use of, or the right to use, any copyright of a literary, artistic, or a scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model plan, secret formula or process, or for information concerning industrial, commercial or scientific experience including gains derived from the alienation of any such right or property whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qua non that the services must result into making available the technical knowledge etc. to the party of the other Contracting State. 10. In other words the services must result into making available the technical knowledge, experience or skill etc. to the other party so as to be covered within its scope of this article and mere providing of such services without making available technical knowledge, experience, etc. to the other party is not sufficient. The assessee has ab initio contended before the authorities below that even if the services rendered by it were held to be technical services but those did not result into "making available" any technical knowledge or experience etc. to the TVCL. From the language of art. 12, we find that the expression "rendering of any technical or consultancy services" is followed by the expression "which make available technical knowledge, experience, skill, know-how". In this context it becomes imperative to understand the meaning of the expression "make available" as used in this article, which is the bone of contention. 'Make available' means to provide something to one, which is capable of use by the other. Such use may be for once only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o fall within the description of services which make available the technical knowledge, etc. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in future without depending on the provider. Taking some examples, the training given to a commercial aircraft pilot or training the staff in particular skills such as software development would fall within the ambit of the said expression in cl. (c). Supposing, a prescription aJ4d advice is given by the doctor after examining the patient and going through the clinical reports. The service rendered by the doctor cannot be said to have made available to the patient, the knowledge and expertise possessed by the doctor. On the other hand, if the same doctor teaches or trains students on the aspects of diagnosis or techniques of surgery, that will amount to making available the technical knowledge and experience of the doctor." 12. Similar view has been taken in the case of Mahindra Mahindra Ltd. vs. Dy. CIT (2009) 122 TTJ (Mumbai)(SB) 577 : (2009) 22 DTR (Mumbai)(SB)(Trib) 361 : (2009) 30 SOT 374 (Mumbai)(SB). It, therefore, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e correct income. 14. It is settled legal position that the primary onus to produce the desired details/information, necessary for the purposes of assessment, is on the assessee. Once the needful is done and the relevant material is made available, then the onus shifts on the assessing authority to controvert the assessee's stand. It becomes his duty to make out a case contrary to what has been stated, if he is not agreeable with the submissions and evidence advanced before him. He may also call for further detail or information from the assessee so as to satisfy himself as to the veracity of the material already placed on record. In that case the onus again shifts on the assessee to prove his case to the satisfaction of the AO. Thus the burden of prove is like a vacillating pendulum shifting from the assessee to the AO, depending on the facts, circumstances and stage of each case. If the AO does not call for any further corroboration from the assessee in support of what has already been furnished, then there arises a presumption that he is satisfied with the explanation tendered on behalf of the assessee. Thereafter he cannot allege the existence of a fact contrary to record wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally stated before the AO about the rendering of such services from overseas. Not only that, the detail of such services along with consideration which is part of VSAT agreement was also made available. In such a situation it is too late in the day for the learned Departmental Representative to contend that the matter be restored to the file of AO for a fresh determination of the nature of services and the resultant taxability. We, therefore, hold since the assessee did not make available any technical knowledge, experience or skill to TVCL by way of rendering PMES FT services overseas. Article 12 of DTAA does not apply in the instant case and the consideration cannot be included in fees for included services. 16. Having held that the assessee did not receive fees for included services within the meaning of art. 12 of DTAA, it requires to be examined as to whether the case of the assessee is covered under art. 7 of "business profits". This article provides that the business profits of an enterprise of one Contracting State may not be taxed by the other Contracting State unless the enterprise carries on business in that other Contracting State through a PE situated there. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing State through a PE situated therein. If the enterprise carries on business as aforesaid, the profits of a enterprise may be taxed in the other State but only so much of them as is attributable to (a) that PE; (b) sale in the other State of goods or merchandise of the same or similar kind as those sold through that PE; or (c) other business activities carried on in the other State of the same or similar kind as those effected through that PE." 19. On going through the mandate of the above article, it boils down that the general rule is that the business profits of an enterprise of one Contracting State may not be taxed by the other Contracting State unless the enterprise carries on business in other Contracting State through a PE. In a case where a PE exists, the other State may tax the income of the enterprise but only so much of the income as is attributable to: (i) That PE; (ii) Sales in that State of goods or merchandise of the same or similar kind as those sold through that PE; or (iii) Other business activities carried on in the other State of the same or similar kind as those effected through that PE. 20. Thus, it can be seen that going by the cl. (a) of art. 7( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further relied on several judgments against the admission of additional ground in such circumstances. 24. We have heard the rival submissions and perused the relevant material on record. It is noted that the learned CIT(A) has held that since the services in question were not performed in India hence no part of such consideration could be attributed to the PE of the assessee in India. The contention of the learned Departmental Representative is correct that the learned CIT(A) has gone only by cl. (a) of art. 7(1), according to which the profits of the enterprise can be taxed in India but only so much of them as are attributable to that PE. The Revenue contends, through the additional ground, that cl. (c) ought to have been considered by the learned CIT(A) as per which the profits of the enterprises can be taxed in India but only so much of them as are attributable to 'other business activities carried on in that State of the same or similar kind as those effected through that PE'. 25. Insofar as the admission of the additional ground is concerned it is austere that there are no clips on the powers of the Tribunal to entertain such ground after giving both the parties of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a distinct nature. Thus, in order to decide the applicability of this clause the business activities carried on by the PE are required to be examined first. There is no finding either of the AO or of the learned CIT(A) about the nature of activities carried on by the PE of the assessee. Thus, if we venture to decide this ground we will first have to examine the activities of the PE, for which no material is available on record and hence would require a totally fresh investigation of altogether new facts. Even the learned Departmental Representative has not placed on record any material to show the activities carried on by the PE for enabling us to make any comparison of those activities with the present disputed activities. Under such circumstances we are of the considered opinion that the additional ground does not pass the test laid down by the Hon'ble Supreme Court for its admission. We, therefore, refuse to admit this additional ground. 27. The second ground is against the non-chargeability of interest under s. 234B. The AO charged interest under this section. The learned CIT(A) held that the assessee could not be subjected to interest as it was not liable to pay advance tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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